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When Should You Buy Heritage-Crystal Clean, Inc (NASDAQ:HCCI)?

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While Heritage-Crystal Clean, Inc (NASDAQ:HCCI) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$30.00 at one point, and dropping to the lows of US$24.24. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Heritage-Crystal Clean's current trading price of US$25.01 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Heritage-Crystal Clean’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Heritage-Crystal Clean

Is Heritage-Crystal Clean still cheap?

Great news for investors – Heritage-Crystal Clean is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.4x is currently well-below the industry average of 20.05x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Heritage-Crystal Clean’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Heritage-Crystal Clean look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -16% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Heritage-Crystal Clean. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although HCCI is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to HCCI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on HCCI for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Heritage-Crystal Clean and you'll want to know about this.

If you are no longer interested in Heritage-Crystal Clean, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.